Bitcoin is going nuts

$788. Is there something that makes Bitcoin really, really attractive?

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Tulips are really, really attractive.


I’ll give you EURO 4,132 for a purple tulip.




Can they issue any more bitcoins? How does it work?

yes, it’s gone nuts, but this may … just … be the beginning

More bitcoins can be “mined” – it’s intended to be a moderately painful/slow computation, which effectively sets their real value to some product of compute power devoted times cycles needed, which should set their base value at something that decreases year over year if one assumes the market is rational; higher bitcoin value or lower cost to compute one should result in more production until the value balances.

I haven’t looked carefully enough to know whether the algorithm gets progressively more difficult, or would be expected to have “bad ore” periods, either of which could cause the flow of new bitcoins to slow. Or if everyone’s just lost interest in mining. Or if the market is being manipulated (which is what I’d personally suspect; this sounds like a market more than ripe for pump-and-dump).

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Yeah - my thinking is though that a second order effect is taking place as it beds in as a “real” currency - a valuable, safe alternative to others. Mmm.

You are far, far more optimistic than I.

  • Decentralized currency
  • All transactions are verified by 3rd party “Miners” and history can never be changed
  • Doesn’t require an address
  • Chinese people can invest in it
  • You can encode messages with it
  • People like graphs that go up and to the right

“Past results are no guarantee of future performance”. Remember the real estate crash as just one recent example. If anything, graphs that look too pretty should be cause for caution.


There seem to be all sorts of shenanigans involving Bitcoin. There’s this story about a company making software to prevent cheating in online gaming, actually using its customers’ computers as a botnet to generate Bitcoins.

What seems exceedingly obvious is that since Bitcoin’s value is wildly unstable, it’s useless as currency. Part of the trouble is, I think, it is intended to be a deflationary currency, which would mean that at any given moment, it would be more rational to hoard Bitcoins than to actually exchange them for goods and services; this is heightened by the fact that Bitcoin’s developers always expected it to be a secondary currency, with more limited use than government-sponsored currencies, which are inflationary. Thanks to Gresham’s Law, this means that Bitcoins will tend to drop out of circulation, further exaggerating the deflationary trend.

Speculators love commodities that are assumed to increase in exchange value over time, because for any purchase price, they can claim that the commodity’s exchange value will eventually exceed it.

The upshot of this is that it’s a natural outcome of the design of Bitcoin that it’s the subject of speculative bubbles.

What’s most astonishing to me is that, as far as I can make out, much of the enthusiasm for Bitcoin as a currency is based upon looking at the history of conflicts about currency in the 19th Century, and concluding that the 19th Century didn’t actually happen.


I never said it would keep going up. :wink: The average investor is pretty terrible.

There have been a few crashes in bitcoin already. For example, when MtGox was hacked.

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There are even companies out there who sell pre-configured servers for mining bitcoins. Reminds me of the gold rushes in Alaska and California – the people who got rich weren’t the miners but the people who supplied them…


Just thinking, rather than betting! A new Bitcoin currency alternative would wipe it out.

One avenue of thought I have - what if major financial firms decided bitcoin was the way to go? So rather than use US$ as a reserve currency, they go for bitcoin. The gold rush would be matched by fundamental strength.

I’ve always been fascinated by currencies - as soon as you start transferring bits of paper representing the underlying goods / services, you get lots of weird effects. Like people actually believe the currency they hold is valuable - which, in a worst case scenario (say, zombies) - is patently untrue.

Bitcoin raises this other dimension - its value is nowhere, not tied to anything.

True! Mining the miners has always been a popular route to success.

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The value is tied to scarcity. There are a finite number of bitcoins that can be mined. In that way, in that way, it’s more like gold than fiat currency which is even more wonky.

Bitcoin could bust but I’m betting that some form of open source / public-ledger / crypto-currency is here to stay. It actually makes a lot of sense if the cryptography is sound.

I love saying fiat. It’s like a karate move. Fiat! Fiat!


Right. “Fiat” - it’s been floating around BBS for a few days!

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“Fix It Again, Tony”?


The algorithm limits how many bitcoins are released. The bitcoin supply will never be greater than 21 million. Bitcoins are infinitely divisible so if it stays around long enough, people will just use units that are more useful. For example: Milli/Micro/Nano bitcoins.